Romania’s C/A balance swings into EUR 261mn deficit in January-March

By bne IntelliNews May 16, 2014

Romania’s Current Account posted a EUR 261mn deficit for January-March, reversing a EUR 6mn surplus in the same period last year – the country’s central bank reported. Nonetheless, the rolling 12-month C/A gap has marginally narrowed from one month earlier to EUR 1,784mn [1.2% of GDP] at the end of March, while remaining not far from the minimum level of EUR 1,353mn [0.9% of GDP] reached at the end of January. Even if the C/A gap is expected to widen on medium term driven by rising domestic demand, neither official not independent forecasts indicate that the gap could widen to more than 2% of GDP in the coming couple of years.

The deterioration of the C/A position in Q1 this year was caused not by the trade segment – where the surplus actually strengthened from EUR 32mn to EUR 166mn, but by the sharp rise in the outflows of incomes [mainly dividends repatriated by FDI companies operating in Romania]. Such outflows expanded by 69% y/y to EUR 1.8bn, in gross terms, and the EUR 729mn nominal rise would have resulted in even wider C/A gap if it was not partly offset by the larger trade and current transfers surpluses.

The inflows of current transfers, typically wage remittances and mainly EU funds absorbed, increased by 35% y/y to EUR 1.1bn in net terms and by 25% y/y to EUR 2bn in gross terms.  They are expected to continue having a positive impact on the country’s external balance in line with the intensity of the absorption of EU funds.

Non-residents’ direct investment in Romania increased by 30% y/y to EUR 570mn. Out of the total, the equity stakes (including earnings gained and reinvested by FDI companies) amounted to EUR 514mn and intragroup loans to EUR 56mn.

CA balance EUR mn 2013 2013 2013 2014 2014 2014 Balance Balance
January-March Inflows Outflows Balance Inflows Outflows Balance y/y ch. y/y ch.
Current Account 15,740 15,734 6 17,263 17,524 -261 -4450% -267
A. Goods and Services 13,877 13,845 32 14,988 14,790 198 519% 166
a. Goods 11,582 12,136 -554 12,754 13,300 -546 -1% 8
b. Services 2,295 1,709 586 2,234 1,490 744 27% 158
            - transport 820 278 542 789 231 558 3% 16
            - tourism and travel 212 304 -92 228 329 -101 10% -9
            - other services 1,263 1,127 136 1,217 930 287 111% 151
B. Incomes 233 1,064 -831 245 1,793 -1,548 86% -717
C. Current Transfers 1,630 825 805 2,030 941 1,089 35% 284
Source: BNR                

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